Tuesday, June 11, 2024

THROWBACK: Part 1: Nixon for Context


Rule of thumb: If a first-term president's term ends with a good, strong economy, he gets a second term. 

 


In "How Richard Nixon Pressured Arthur Burns: Evidence From the Nixon Tapes" Burton A. Abrams writes: 

In Nixon’s 1962 book, Six Crises, he recounts that Arthur Burns called on him in March 1960 to warn him that the economy was likely to dip before the November election. Nixon writes that Burns “urged strongly that everything possible be done to avert this development. He urgently recommended that two steps be taken immediately...”

Their idea was to improve the economy enough that Vice President Nixon would win the election and take his turn as President when Eisenhower's second term was up. Today this would be called "election interference."

No steps were taken. Abrams continues:

Herbert Stein, who was a member of the Council of Economic Advisers from the start of Nixon’s [first] term and became chairman at the start of 1972, confirms that Nixon blamed a modest rise in the unemployment rate as one of the reasons he lost the 1960 election.

Thus our rule of thumb. Again, Abrams: 

Evidence from the Nixon tapes, now available to researchers, shows that President Richard Nixon pressured the chairman of the Federal Reserve, Arthur Burns, to engage in expansionary monetary policies in the run-up to the 1972 election.

Here, the election interference appears to be driven by Nixon. In their 1960 encounter, it seems to have been Burns's idea. At least, that's how Nixon remembered it for Six Crises.

In both cases, 1960 and 1972, the plan was to improve the economy enough to keep the incumbent (or his party) in power. There is something almost heartwarming about Nixon's interference, because in both cases the idea was to improve the economy. Both times, however, the interference was conceived as a way to assure the election (or re-election) of Nixon. Both times, Nixon was engaged in election interference intended to benefit Nixon.

 

From "Nixonomics: How the Game Plan Went Wrong" by Rowland Evans, Jr. and Robert D. Novak, in Atlantic Monthly, July 1971[1]:

During that difficult decade after his defeat in 1960, aides and close friends had heard Nixon say privately time after time that had President Eisenhower only taken his and Arthur Burns's advice early in 1960 and moved rapidly toward stimulating the economy, he -- not Jack Kennedy -- would have been elected President. The implication, not quite stated flatly, was that Richard Nixon, if he had the power, would never again go into a presidential election with the economy in a state of deflation.

Note 1: As reprinted in Stabilizing America's Economy (The Reference Shelf, Vol. 44 No. 2); edited by George A. Nikolaieff.

Evans and Novak show Nixon fully committed to election interference.

More dirt on Nixon, this from the "Federal Reserve Chairman" section of Wikipedia's article on Arthur Burns:

Nixon later blamed his defeat in 1960 in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning the presidential election of 1968, Nixon named Burns to the Fed Chair in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.

Later, when Burns resisted, negative press about him was planted in newspapers and, under the threat of legislation to dilute the Fed's influence, Burns and other Governors succumbed. Burns's relationship with Nixon was often rocky. Reflecting in his diary about a 1971 meeting attended by himself, Nixon, Treasury Secretary John Connally, the Chairman of the Council of Economic Advisors, and the Director of the Bureau of the Budget, Burns wrote:

The President looked wild; talked like a desperate man; fulminated with hatred against the press; took some of us to task – apparently meaning me or [chairman of the Council of Economic Advisors, Paul] McCracken or both – for not putting a gay and optimistic face on every piece of economic news, however discouraging; propounded the theory that confidence can be best generated by appearing confident and coloring, if need be, the news.


Wikipedia also includes a detail which seems to have been omitted from All the President's Men, the great Alan J. Pakula movie starring Robert Redford and Dustin Hoffman:

At the Watergate break-in of 1972, the burglars were found carrying $6300 of sequentially numbered $100 bills. The Fed lied to reporter Bob Woodward as to the source of the bills. Burns stonewalled Congressional investigations about them and issued a directive to all Fed offices prohibiting any discussion of the subject.

Watergate was just one more example of Nixon tampering with elections. That time, however, it did not include improving the economy. Watch the movie. Watch All the President's Men

Improving the economy as a form of election interference might seem by comparison a good idea. But when winning the election intrudes on economic policy, the economy will lose every time. And the incidental considerations, like lying to Bob Woodward, stonewalling Congress, and prohibiting discussion are but a Nixon Sampler of the damage created by such manipulations.

By the way, Richard Nixon and Donald Trump were pen pals.

 

 

In The Emerging Republican Majority (1969), Kevin P. Phillips identifies "the two principal architects" of the emerging Republican majority: Richard Nixon and John Mitchell. Among that emerged group, then, Nixon's sleazebag behavior is apparently seen as worthy of emulation.

 

 

From Wikipedia's "Arthur F. Burns" article:

Burns served as Fed Chairman from February 1970 until the end of January 1978. He has a reputation of having been overly influenced by political pressure in his monetary policy decisions during his time as Chairman[13]...

Footnote 13 reads:

Bartlett, Bruce (2004-04-28) "(More) Politics at the Fed?", National Review

There is this link:

http://www.nationalreview.com/articles/210446/more-politics-fed/bruce-bartlett

That link is broken. This one works:

https://www.nationalreview.com/2004/04/more-politics-fed-ridhancock/

The link turns up "(More) Politics At The Fed?" at National Review,  attributed to RIDHANCOCK. (Bruce Bartlett is acknowledged in a note below the article. I will refer to the article as the Bartlett article.)

The Bartlett article says:

Nixon wanted to keep monetary policy loose in order to make sure the economy was robust going into the election. This led to the imposition of wage and price controls in August 1971.

That paragraph concludes: 

While everyone knew they would not work for long, the controls reduced inflation enough to keep monetary policy expansive through November 1972, which was all that mattered.

Now, that sounds like Nixon: Getting elected was be-all and end-all.

 

The Bartlett article (dated April 28, 2004) opens with this paragraph:

Rising inflation and interest rates, although still low by historical standards, are starting to get the attention of economists. It is becoming harder and harder to find an economist who doesn’t think the Federal Reserve needs to tighten monetary policy soon. However, Fed officials continue to say that unemployment, low capacity utilization, and strong productivity growth argue against tightening at this time. They may be right. But one cannot help but suspect that politics is also playing a role.

Once you see election interference in Nixon, it is easy to see elsewhere.

The article concludes with these thoughts:

The reason this [Nixon/Burns] history is relevant today [2004] is because the Fed is under increasing pressure to tighten monetary policy. While there is no evidence of White House pressure to keep monetary policy easy, one can assume that it will not be displeased if the Fed avoids tightening before Election Day.

Fed Chairman Alan Greenspan is well respected and no one believes he would knowingly use monetary policy for political purposes. However, the longer he waits to tighten monetary policy, the more people are going to ask whether politics is playing a role.

Once you see it in Nixon, you see it everywhere.

Bartlett (or RIDHANCOCK) was aware of Nixon's willingness to use economic policy for political gain. Because of rising inflation and an unresponsive Fed, Bartlett grew concerned about election interference in the era of George W. Bush and Alan Greenspan. Not that there was evidence of interference. But inflation was rising, and interest rates were not. Bartlett saw the possibility of election interference, and he couldn't look away. 

I can respect that.

 

If you go looking, you can find tales of Nixon and Burns in many places. The other day I came upon three that I had not seen before. They broaden the picture substantially. Here is a quick look:

At AP News, 12 May 2022:

The chronically high inflation of the 1970s has been attributed, in part, to political pressure that led the Fed to forgo steep rate hikes under Presidents Lyndon Johnson and Richard Nixon.

At AP News, 31 May 2022:

In the early 1970s, President Richard Nixon pressured Fed chair Arthur Burns to lower interest rates to spur the economy before Nixon’s 1972 reelection campaign. Nixon’s interference is now widely seen as a key contributor to runaway inflation, which remained high until the early 1980s.

At Business Insider, 11 March 2024:

Richard Nixon pressured the Fed to keep interest rates low before his reelection, which helped cement the disastrous inflation of the 1970s. Ronald Reagan got the message to the central bank on his wants during his presidency, getting his chief of staff to tell then-Fed Chair Paul Volcker not to raise rates ahead of his reelection campaign. Volcker wasn't planning to raise rates anyway. In recent decades, however, most presidents shied away from saying much, until Trump.

Good article, that last. 


This all leaves me wondering about Donald Trump, Fed Chairman Jerome Powell, and the Biden inflation. 

I have no evidence that Trump and Powell talk the way Nixon and Burns talked. I have no evidence that Powell's March 2021 announcement (inflation is coming) was a coded message to administered-price setters to start raising prices. I have no evidence that the Fed's year-long delay before raising interest rates (March 2021 to March 2022) was somehow part of a Republican plan to take Biden down. I have no evidence. That doesn't mean it didn't happen.

Was the post-pandemic inflation created, weaponized, and used by Republicans in an attempt to defeat Joe Biden? Even if this question is spread only by rumor and innuendo, it could still have powerful consequences for the November election: The rumor shows the 2021-2024 inflation to be Trump's fault rather than Biden's. And the inflation has hit Trump supporters -- has hit us all, really -- hard in the pocketbook.

Friday, June 7, 2024

"Will Prices Drop?" -- 2½ pages from Irving Fisher

From Google Books, "Read free of charge". (I looked up temporary inflation.)

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